Housing market keeps sinking across Arizona

A new report suggests that Arizona's housing market continues to search for a bottom. The average Arizona home now sells for about half of what it would have five years ago.

In its quarterly report, the Federal Housing Finance Agency said the purchase price of homes that it tracks dropped an average of nearly 4.6 percent from the first to the second quarter of this year.

That sent the year-over-year decline to 14.9 percent.

No state did worse on an annual basis.

By comparison, nationwide housing prices fell on average 5.9 percent.

Jay Butler, professor emeritus at the W.P. Carey School of Business at Arizona State University, said there are a variety of reasons for the continued plunge. But he described the situation in non-economist terms.

"Right now, it sucks," he said.

The agency's report gives a broad picture of the housing market's health because it tracks not only the sale price of the same houses over several years, it also monitors refinancing data.

That provides a more comprehensive assessment of what a community's homes are worth, whether they are sold or not.

Around Arizona, home-price sales from other key metropolitan areas told the same story.

Four of the state's metro areas are among the 20 worst for year-over-year declines in housing values, compared with more than 300 communities monitored across the nation.

The Phoenix area, which includes both Maricopa and Pinal counties, logged a 15 percent annual decline, followed by a 12.9 percent drop for Yavapai County, 11.3 percent decline in Pima County and nearly 11 percent in Yuma County.

There was an 8 percent drop in home prices in Coconino County since the same time last year and an 8.5 percent decline in Mohave County.

Marshall Vest, economist at the Eller College of Management at the University of Arizona, said there won't be a turnaround in the trend until the fundamentals of the housing market get better.

That will start when the region begins to absorb the excess supply of homes, he said.

"We have enough vacant houses here in the state of Arizona to accommodate an entire decade worth of population growth," he said. "And that's if the population were growing."

Weak housing markets in other states compound the housing-market problems in Arizona, Vest said.

"Mobility is near zero," he said. "People are frozen in their houses," unable to sell them, at least at a price at which they would be able to pack up and move to Arizona.

One reason prices continue to plummet is that buyers have gravitated to certain kinds of houses, said Butler, the real-estate expert.

"The only thing that's being sold right now are investment properties: rentals and cheap properties," he said.

"That just keeps the lid on any appreciation and keeps on forcing prices down even further.

"And there's no pent-up demand at the moment for a move-up market, so there's nothing to accelerate any appreciation."

Vest agreed.

"We have a high proportion of distressed sales in the market," he said.

"That's going to continue to put downward pressure on prices."

Vest said that although the number of homes being sold in foreclosure and at foreclosure prices is declining a bit, "there seems to be a lot of houses still in the pipeline."

Butler said prices will not pick up until other elements of the economy recover, including the job market.